The tax charge in a set of company accounts is one of the last corporate myths.
Tax accounting is complex. It involves knowledge of:
- tax rates;
- cash flow;
- deferred tax;
- provision accounting.
After that it still requires a considerable amount of judgement and experience to undertsand the result. It's not surprising that most City analysts reckon the tax fiugure in a set of accounts is the final frontier that they will not approach.
Those in the City of London and the organisations that support it, such as the CBI, have come to rely on this lack of knowledge of tax in corporate accounts to make a wide variety of claims about the burdens of taxation that they suffer. These include:
- that the tax burden they are suffering is increasing;
- that the burden of other taxes they have to pay is rising;
- that there is no such thing as the 'tax gap', which is the difference between what society expects them to pay in tax and what they actually pay;
- that all is well in the world of tax accounting and if there are issues surrounding tax paid by large companies then that is not the responsibility of the companies themselves or of their auditors.
The Tax Gap Limited was created to test whether these claims are true.
The Tax Gap Limited published the first report on this theme on 15 January 2006, entitled "Mind the Tax Gap".